UK pledge on ‘casino’ banking

Britain’s Deputy Prime Minister,
Nick Clegg,
indicated the government would back a break-up of banks to “make them safe" and protect the British economy from having to bail them out again.

Mr Clegg said on Sunday there was a “very strong case" for separating high-risk “casino" banking from low-risk, high-street banking to ensure banks were no longer “too big to fail".

His comments come after the head of the independent review into banking, John Vickers, indicated he would recommend an overhaul of the banks.

Mr Clegg insisted the issue was more important than the so-called Merlin project – the current round of talks with the banks over bonuses, disclosing executive pay, contributing to a “Big Society" bank and lending more to firms. The talks are reported to have foundered and an announcement, which had been expected as soon as today, has been postponed.

Labour claimed Mr Clegg was attempting to deflect attention from the stalled talks, while Treasury sources insisted they were still considering options to “get the best deal for the taxpayer".

Mr Clegg said: “The banking system needs to be made safe. It can never again become such an oversized liability for the British economy. That’s why I think there is a strong case to look at the way in which you can hive off or insulate very high-risk, overleveraged banking activities from low-risk, high street retail banking."

He turned fire on the new shadow chancellor, Ed Balls, blaming him for failing to crack down on banking regulation when he was City minister. “If you ask yourself who was in charge of the City when they were gorging themselves on bonuses and lending irresponsibly, who allowed the housing market to become a casino, who was whispering into [then prime minister] Gordon Brown’s ear budget after budget, creating this huge fiscal deficit – the answer is Ed Balls," he said.